The Contractor's Compass August 2014

THE

ASA’s

THE OFFICIAL EDUCATIONAL JOURNAL OF THE AMERICAN SUBCONTRACTORS ASSOCIATION

WWW.ASAONLINE.COM

Field Management Going Mobile

AUGUST 2014

Field Management

There’s Gold in Fleet Management: 8 Ways Tools Can Optimize Your Fleet Public Private Partnerships: Payment Security Concerns OSHA Hazcom and the Global Harmonized System Legally Speaking: Project Legal Considerations for Field Personnel Save the Date!

March 26-29, 2015 Seattle, WA • See page 14.

THE

ASA’s

August 2014

Features EDITORIAL PURPOSE The Contractor’s Compass is the monthly educational journal of the Foundation of the American Subcontractors Association, Inc. (FASA) and part of FASA’s Contractors’ Knowledge Network. The journal is designed to equip construction subcontractors with the ideas, tools and tactics they need to thrive.

Field Management Going Mobile ........................................... 6

by Tara Cordova

There’s Gold in Fleet Management: ....................................... 8 8 Ways Tools Can Optimize Your Fleet

The views expressed by contributors to The Contractor’s Compass do not necessarily represent the opinions of FASA or the American Subcontractors Association, Inc. (ASA).

by Todd Ewing

Public Private Partnerships:................................................... 12 Payment Security Concern

EDITORIAL STAFF Editor-in-Chief, Marc Ramsey MISSION FASA was established in 1987 as a 501(c)(3) taxexempt entity to support research, education and public awareness. Through its Contractors’ Knowledge Network, FASA is committed to forging and exploring the critical issues shaping subcontractors and specialty trade contractors in the construction industry. FASA provides subcontractors and specialty trade contractors with the tools, techniques, practices, attitude and confidence they need to thrive and excel in the construction industry.

by E. Colette Nelson and Lenora Marema

OSHA Hazcom and the Global Harmonized System............. 16

by Wayne Baruch

FASA BOARD OF DIRECTORS Richard Wanner, President Letitia Haley Barker, Secretary-Treasurer Brian Johnson Robert Abney Anne Bigane Wilson, PE, CPC

Departments

SUBSCRIPTIONS The Contractor’s Compass is a free monthly publication for ASA members and nonmembers. Subscribe online at www.contractorsknowledgedepot.com.

LEGALLY SPEAKING................................................................ 19

ADVERTISING Interested in advertising? Contact Tony Kozak at (716) 844-8174 or advertising@asa-hq.com.

EDITORIAL SUBMISSIONS Contributing authors are encouraged to submit a brief abstract of their article idea before providing a fulllength feature article. Feature articles should be no longer than 1,500 words and comply with The Associated Press style guidelines. Article submissions become the property of ASA and FASA. The editor reserves the right to edit all accepted editorial submissions for length, style, clarity, spelling and punctuation. Send abstracts and submissions for The Contractor’s Compass to communications@asa-hq.com.

ABOUT ASA ASA is a nonprofit trade association of union and non-union subcontractors and suppliers. Through a nationwide network of local and state ASA associations, members receive information and education on relevant business issues and work together to protect their rights as an integral part of the construction team. For more information about becoming an ASA member, contact ASA at 1004 Duke St., Alexandria, VA 22314-3588, (703) 684-3450, membership@asa-hq.com, or visit the ASA Web site, www.asaonline.com.

CONTRACTOR COMMUNITY.................................................... 4 Project Legal Considerations for Field Personnel

by Adam Harrison

CONTRACT CORNER.............................................................. 21 Negotiate Better Contract Terms

Quick Reference ASA/FASA CALENDAR........................................................... 22 COMING UP........................................................................... 22

DESIGN & LAYOUT Dennis Lowry www.drlmultimedia.com © 2014 Foundation of the American Subcontractors Association, Inc.

T H E

C O N T R A C T O R ’ S

C O M P A S S

A u g u s t

2 0 1 4

3

Contractor Community

4

Construction Coalition Calls for Federal Procurement Reform

DOL Proposes Rule on Minimum Wage for Federal Contractors

ASA joined a coalition of 13 construction contractor, design professional and surety associations in calling on the U.S. Senate to support legislation that “would help increase opportunities for small businesses, prevent government waste and fraudulent transactions, and grow federal public-private partnerships (P3s).”

The coalition-supported bill provides a framework for growth in the construction industry and for more efficient federal government procurement through simple, no-cost to the government solutions. Many of these solutions have individually received bipartisan support in the House of Representatives. These include reforms based on H.R. 776, the Security in Bonding Act; H.R. 2752, the Common Sense Construction Contracting Act; and H.R. 2750, the Design-Build Efficiency and Jobs Act. Collectively, these bills would help address assurance of subcontractor payment by preventing fraud by providing financial certainty to assets that support individual surety bonds, address anti-competitive and efficiency issues with reverse auction procurement for design and construction services, and encourage better utilization of design-build project delivery. In addition, the coalition bill would help grow federal P3 opportunities by providing payment certainty for subcontractors and suppliers by extending the tenets of the federal Miller Act to such projects.

On June 17, the U.S. Department of Labor issued a proposed rule to raise the minimum wage for workers on federal service and construction contracts to $10.10 per hour. The proposed rule implements Executive Order 13658, which was announced by President Barack Obama on Feb. 12. The proposed rule will apply to new contracts and replacements for

A U G U S T

2 0 1 4

expiring contracts that result from solicitations issued on or after Jan. 1, 2015, and to contracts that are awarded outside the solicitation process on or after Jan. 1, 2015.

The proposed rule provides guidance and sets standards for employers concerning coverage. It also establishes an enforcement process familiar to most government contractors and will protect the right of workers to receive the new minimum wage.

The proposed rule includes an economic analysis showing that nearly 200,000 workers will benefit from the increase.

T H E

Case Before U.S. Appeals Court Threatens Alabama Subcontractors’ CGL Coverage Even though the Alabama Supreme Court recently issued an opinion in a case that confirmed coverage for construction defects under state law, subcontractors in Alabama are facing another threat to the coverage for which they pay premiums.

“Construction insureds pay substantial premiums for liability insurance to protect themselves from property damage arising out of inadvertent and alleged construction defects,” ASA, the Associated General Contractors of America and the Alabama AGC wrote in an amici curiae brief to the U.S. Court of Appeals for the 11th Circuit in Pennsylvania National Mutual Casualty Insurance Company v. St. Catherine of Siena Parish. “Only a few months ago, the Alabama Supreme Court issued its opinion in Owners Ins. v. Jim Carr, a case that confirmed coverage for construction defects under Alabama law. The district court’s application of the Contractual Liability Exclusion supports a back door circumvention of that coverage through an unwarranted overextension of the Contractual Liability Exclusion. Taken to its logical end, that over-extension will result in the elimination of the coverage preserved in Jim Carr. Therefore, Amici Curiae request the court reverse the district court and render judgment in favor of St. Catherine’s, or alternatively, to certify the question of whether the Contractual Liability Exclusion truly applies to breach of a warranty undertaken by an insured in its construction contract.”

In the underlying case, the

C O N T R A C T O R ’ S

C O M P A S S

dispute involved a project by the parish to replace the roof on two of its buildings with a 40-year roof shingle. The parish contracted with Kiker Corporation for the work, and Kiker obtained a commercial general liability policy through carrier Penn National. The policy provided coverage to claims for property damage caused by an “occurrence” and defined an occurrence as “an accident.” The policy also contained the standard “your work” and “contractual liability” exclusions.

Kiker subcontracted the roofing portion of the work and work was completed in March 2004 on one building and in February 2005 on the second building.

The second building almost immediately began leaking and two years later the first building also began to leak, causing extensive damage to the gypsum substrate of the roof as well as the interior and ceiling of the buildings. Despite repair efforts, the problems were not fixed and the parish hired a roof inspector, who investigated and claimed the leaks were caused by installation errors, construction defects and other breaches by Kiker.

The parish sued and, though Penn National defended Kiker, it did so under a reservation of rights, claiming there would be no coverage under the policy for damages caused by a breach of contract or breach of warranty. At trial, the jury awarded the parish $350,000 in compensatory damages for breach of contract. After the verdict, Penn National initiated a declaratory judgment action in federal court asking the U.S. District Court for the Southern District of Alabama to determine whether it was responsible to indemnify Kiker and pay the verdict. Penn National argued it had no such obligation because a breach of contract claim was not an “occurrence” under the policy and even if such claims were T H E

C O N T R A C T O R ’ S

an occurrence, the contractual liability and/or “your work” exclusions would bar recovery.

The U.S. District Court for the Southern District of Alabama held that there was coverage for the property damage caused by the leaks because an “accident” meant an unintended and unforeseen injury and the allegedly faulty workmanship led to damage to other areas of the structure and thus damage beyond simply the cost to replace the defective roof.

The court held that the “your work” exclusion did not bar recovery for the cost of the defective roof replacement because the subcontractor had performed the roofing work. However, the court used the “contractual liability” exclusion to deny coverage of any claims arising from a breach of contract, stating “under binding Alabama law the breach of contract claim and the implied warranty claim are excluded from coverage under the contractual liability exclusion.” Kiker petitioned the 11th Circuit Court of Appeals asking it to reverse or certify the question of the breach of the contractual liability exclusion to the Alabama Supreme Court.

In their brief, ASA, AGC and the Alabama AGC wrote: “The proposition that an insurer should not be obligated to pay claims that are outside the coverage of the policy is not astounding. However, some insurers are extremely adept at finding reasons, some would say excuses, to deny what otherwise appear to be claims more than arguably within the coverage of the policy. This is particularly true as to claims involving allegedly defective workmanship by insured contractors under their commercial general liability policies, and if the position advocated by Pennsylvania National is adopted by this Court, insurers will invariably have yet another excuse to deny legitimate claims.” ASA, AGC and the Alabama AGC further argue in their brief that “applying the Contractual Liability Exclusion to property damage to an insured contractor’s work simply because that property damage may breach its contract has a profoundly negative effect on CGL coverage for the construction industry. It is nothing short of a radical departure from C O M P A S S

the means by which CGL coverage has traditionally been marketed and provided by the insurance industry to contractors.”

ASA’s Subcontractors Legal Defense Fund financed the brief. Contributions may be made to the SLDF via the ASA Web site.

ConsensusDocs Updates Contracts Catalog The ConsensusDocs coalition has updated its catalog of contract documents. ConsensusDocs are the only standard contracts written and endorsed by 40-plus leading design and construction industry associations. ASA is a founding member of the ConsensusDocs coalition, which publishes a library of 100-plus contracts and documents. ASA members can use the promotional code ASA100 to receive a special member discount off ConsensusDocs subscriptions.

Subscription packages include: • Subcontracting Package — Unlimited use of subcontracting and select other contracts for one year: $449/ASA members and $549/non-members.

• Prequalification Forms Package — FREE user license (Contracts included: 220, 221, 222, 421, 721).

• Full Package — Unlimited use of all 100-plus contracts for one year: $799/ASA members and $999/nonmembers.

• Express Package (Unlimited) — Unlimited use of select short form and administrative contracts for one year: $349/ASA members and $449/non-members.

• Express Package (Pay Per Contract) — Select short form and administrative contracts for one year, plus per contract fee: $249/ ASA members and $349/nonmembers.

• New Design Professional/Owner Package — Unlimited use of design professional and select other contracts for one year: Regularly $399/ASA members and $499/ non-members, but now offered for $349 for a limited time.

A u g u s t

2 0 1 4

5

Feature Field Management Going Mobile

by Tara Cordova

Field management, like most construction activities, is evolving as technology transforms how work gets done on projects.

Given the prevalence of smart phones in daily lives, it is little surprise that mobile technology in particular has become a key driver of change in field management.

Indeed, mobile devices increasingly have become business tools for construction project professionals working in the field. As more companies take the leap and integrate mobile technologies into their operations, it is critical for subcontractors to understand how these tools can help them perform more efficiently and effectively in concert with general contractors and other partners.

organizations involved, effective communication is vital to successful, on-time project completion. This concept is particularly relevant to field management, as a lack of good, ongoing communication about the status and quality of work performed can lead to confusion, rework, and in the worst case, disputes that result in costly project delays.

In traditional field management, when the project manager identifies an issue to be resolved, they may simply mark the problem with painter’s tape, jot some comments into a notebook, and call the responsible subcontractor to request that the issue be fixed. Unless all of the relevant information is properly communicated to the subcontractor, however, they may not be able to determine what the problem is when visiting the jobsite. So, instead of A Tale of the (Blue) Tape fixing the issue quickly and efficiently, Given the complexity of the subcontractor wastes valuable construction projects and time trying to understand what the number of needs to be done — or tracking down someone who can help. Blue tape alone doesn’t tell the story.

What’s more, the project manager’s call may simply result in a message left at the office, which the individual responsible may not receive for some time. Now, while the project manager believes that the issue is being addressed, � Mobile technology is driving the person responsible change in field management. for fixing the problem is unaware that it has even been identified � Going mobile can improve — a situation most communication, reduce rework subcontractors have and improve relationships. no doubt experienced.

In addition, resolving an issue may require � Mobile offers a collaborative action from more approach in a secure, cloudthan one trade based workspace. subcontractor, which

IN THIS ARTICLE . . .

6

A U G U S T

2 0 1 4

T H E

increases the complexity of the process. And, when communicating about quality issues and resolution status, project participants may use various modes, including faxes, emails, phone calls and even text messaging. With so many project participants and forms of communication in play, the potential for confusion and frustration increases exponentially.

Mobile Changing the Game The growing presence of mobile technology on jobsites can exacerbate these communication problems.

With more project participants using phones and other mobile devices, the tendency to call or dash off a quick email or text increases. But used the right way, mobile technologies also offer dramatic benefits that can improve communication, reduce rework, and generally improve relationships on the jobsite. The key is moving from simple communication to real collaboration.

Mobile technology offers tremendous opportunity for collaborative approaches to field management tasks by enabling the use of cloud-based virtual “workspaces.” These online environments allow project participants to securely share critical information in a centralized location that is available to all. Using their smart phones, tablets, and other devices, construction project participants in the field can use mobile applications, also known as “apps,” to perform all of the actions needed to ensure speedy resolution of issues.

In the earlier example, the project manager encountered a quality issue during a review, attempted to

C O N T R A C T O R ’ S

C O M P A S S

“Mobile devices increasingly have become business tools for construction project professionals working in the field. As more companies take the leap and integrate mobile technologies into their operations, it is critical for subcontractors to understand how these tools can help them perform more efficiently and effectively in concert with general contractors and other partners.”

mark the problem using painter’s tape, and then placed a call to the subcontractor. But with mobile field management, the project manager can instead quickly and simply create a detailed record of the issue via the mobile application, supported by digital photos. This record includes all the information about the issue needed to ensure speedy and easy resolution, including: • Detailed description, including location and nature of the problem.

• Project participants affected — and expected actions.

• Digital project drawings, photos and annotations.

Once the issue information is available in the cloud, notifications typically are sent to the appropriate individuals via their mobile devices, reducing the back-and-forth and waiting time associated with conventional communications.

This collaborative approach can help reduce miscommunication, and enables everyone to work from a “single version of the truth” for field management materials. With clearly defined issues — supported by visuals — and explicit expected actions, the subcontractor doesn’t have to waste time trying to understand the problem. Instead, he or she can immediately undertake the right work to fix it.

T H E

C O N T R A C T O R ’ S

In addition, because all reports, actions, and statuses are captured and tracked centrally, everyone can see at any time where things stand with respect to all relevant tasks. This helps subcontractors with their own project management, enabling them to determine how best to allocate resources to maximize productivity.

And, should a disagreement arise, there is a record — including annotated photos — of what happened when. This can help clarify accountability, as well as bring about a quick and easy resolution and

resulting in delays.

To be sure, maintaining good relationships with general contractors is a critical part of success as a subcontractor. Efficiently addressing quality issues and avoiding costly disputes are keys to protecting both relationships and, just as importantly, reputations.

The construction industry is changing rapidly and will continue to evolve as technology facilitates ever more streamlined and collaborative activities. Especially in today’s economy, subcontractors need to consider all tools that help them — and all project participants — complete the job efficiently and effectively. Taking advantage of technology that minimizes friction and improves the field management process can be a competitive differentiator that keeps your work pipeline flowing with opportunities.

Tara Cordova is president of Latista Inc., a cloud-based field management solution that is part of the Textura Corp. suite of construction collaboration solutions. She can be reached at tara.cordova@texturacorp. com or (703) 391-1070.

prevent tensions from escalating and C O M P A S S

A u g u s t

2 0 1 4

7

Feature There’s Gold in Fleet Management: 8 Ways Tools Can Optimize Your Fleet

by Todd Ewing

In an ideal world, a subcontractor’s day runs like clockwork. All of your employees are where they’re supposed to be, when they’re supposed to be there.

They take the most efficient routes to their jobs, allowing them to spend more time onsite and save money on fuel. But you know what they say about the best laid plans: They often go astray.

Fleet management software, however, can help get your team back on track by providing realtime insights into where your team is and what they are doing. GPS fleet tracking has a reputation for simply being a tactical practice. But new tools offer companies a much greater strategic boost, proving there’s more to fleet management than just watching dots on a map.

Only 12.6 percent of commercial vehicles in the United States and Canada use fleet management software,

IN THIS ARTICLE . . . �

�

�

8

according to the research agency Frost & Sullivan. But it’s a growing practice. The firm MarketsandMarkets predicts the fleet management sector will grow from $10.91 billion in 2013 to $30.45 billion by 2018. Getting in on the trend now is a simple way to leap ahead of the competition.

It doesn’t matter what size fleet you operate: Businesses with as few as five vehicles or as many as several thousand can see a solid ROI once they implement a tracking system. The cost benefits of a more efficient fleet can be huge.

With efficient fleet management, employees can spend more time on the job and less time on the road. Collectively, businesses that employed fleet management software save about 1.3 billion payroll hours per year — that equates to nearly $35 billion in payroll savings, just because their employees spend less time driving.

Here are eight ways you can boost productivity and save money through fleet management:

Make More Service Calls Each Day

New fleet management tools offer more than just watching dots on a map.

Reduce time on the road, schedule maintenance more precisely and monitor risky driving.

Improve time-card reporting, safeguard against theft and lower fuel expenses.

A U G U S T

2 0 1 4

It’s basic math: The more service calls your employees make per day, the more money they’re bringing into the business. A fleet management program facilitates more stops by helping operators find and recommend the most efficient routes for their drivers.

Based on a Fleetmatics study of companies

T H E

using fleet management solutions, companies on average are able to increase the number of stops each day by 13 percent. Heavy contractors specifically make about 4.6 calls per vehicle per day, according to Fleetmatics research. After implementing a fleet management solution, they boost the number of calls to 5.5 — a 20 percent increase. Over the course of a year, 20 percent more calls each day add up to a big bump for revenue.

Know Where Your Vehicles Are Without Calling Drivers One of the most basic benefits of fleet management software is knowing where your vehicles are, all the time. Rather than making a bunch of phone calls to track down employees during the day, you can simply rely on the mapping element to locate your team.

Say for instance your company is called to do an emergency repair.

You need to get the right equipment to the location as quickly as possible. Fleet tracking enables you to see where the right equipment is and, if you have multiples, which one is closest to the destination.

You can dispatch the driver with ease while reporting back to the customer when he or she can expect help to arrive.

“I don’t have to waste time calling the drivers to see where they are anymore,” said Rick Kelly, physical operations manager at Kawartha Capital Construction. “I would say productivity has increased 90 percent.

Customer service has improved as well — I can just look at the map and tell the customer where our guys are.”

C O N T R A C T O R ’ S

C O M P A S S

Schedule Maintenance More Precisely

schedule helps businesses run smoothly, keeping small problems from becoming large ones. Your equipment will spend less time in the shop and more time on the job.

Businesses can use fleet management tools to keep maintenance on track by setting automatic alerts based on vehicles’ actual mileage, hours of use or time elapsed. The reminders can offer an efficient way of tracking maintenance schedules so managers don’t end up servicing vehicles too frequently or, worse, not enough. The last thing you want is for a piece of heavy equipment to break down first thing in the morning just because it’s overdue for an oil change.

“I know just by speaking with our shop foreman that it’s helped us because he knows he’s serving equipment more frequently and catching issues earlier than before,” said Jeremy Worley, safety director and GPS coordinator for B. Jackson Construction. “In the past, we found quite a few vehicles were out of compliance.”

Upholding a regular service

Monitor Risky Driving Behaviors Drivers might break hard, accelerate fast or cut tight corners in the interest of getting from point A to B faster, but in the long run those behaviors will eat up fuel and take a toll on your vehicles.

Business operators can track risky driving habits through a fleet management solution connected to the ignition.

A summary report will list individual drivers by vehicle and detail how often they start quick, idle or engage in other potentially destructive driving patterns while rating the severity of the incidents.

“I get calls from guys in the field who will say somebody jumped in front of them and that they had to slam on their brakes,” Worley said.

“They will explain their case before I get the alert because they receive the notification, too. It shows they’re paying closer attention to their driving behaviors.”

Good driving habits decrease wear and tear on vehicles, keeping them in service longer — so you’ll spend less time worrying about repairs and researching new equipment.

More Accurate TimeCard Reporting It happens to even the best employees: Maybe they’re in a rush and just round up their hours rather than accurately entering their time cards. But even with a small team, tiny increments of time can add up to a huge amount of payroll expenses over the course of a year.

Fleet management software can monitor vehicle departure and site arrival times, as well as the driver’s name, the driving time and distance traveled, giving you a picture of how long your employees actually

THE

Win. Win. QQ

QQ

Sell your products and services. Advertising reaches industry leaders and decision-makers who spend $11+ billion annually on products and services.

Support ASA. Advertising supports ASA, the industry voice of trade contractors.

That’s a win-win situation.

To advertise in The Contractor’s Compass, contact Tony Kozak at (716) 844-8174 or advertising@asa-hq.com

T H E

C O N T R A C T O R ’ S

C O M P A S S

A u g u s t

2 0 1 4

9

MAY 7 TH , 8:10 A .M .

A HANDY REFERENCE TOOL BRINGS HIGHER PROFIT WITHIN REACH IN AN INS TANT, A R IK M U L L EN R E A L IZE D THE VA LU E O F M OTI O N I S M O NE Y ®

AmSlab Solutions founder, Arik Mullen, is always finding ways to solidify his concrete business.

So when he learned how a simple workbook available through CNA’s Motion is Money® program could highlight hundreds of hours of worker inefficiencies, he called his Risk Control Specialist, conducted a worksite audit, and developed a plan to minimize bending, lifting and reaching for tools.

Now AmSlab productivity is up 3%, and Arik’s enjoying a much healthier bottom line.

When you’re looking for programs that help keep workers safe and businesses strong … ® we can show you more.

To learn how CNA’s insurance programs for contractors can help your business grow more profitably, contact your independent agent or visit www.cna.com/construction.

The examples provided in this material are for illustrative purposes only and any similarity to actual individuals, entities, places or situations is unintentional and purely coincidental. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice. CNA is a registered trademark of CNA Financial Corporation. Copyright © 2014 CNA. All rights reserved.

Click on chart for larger view

spend on the job. Between 2012 and 2013, B. Jackson saved roughly $750,000 in labor costs just by using the software to double-check time cards.

Safeguard Your Heavy Equipment Fleet tracking hardware isn’t just for vehicles that spend a lot of time on the road. It can be installed on any type of equipment with a 12-volt power source, from generators to backhoes, as an extra form of insurance against theft.

UnitedWorldwide car service co-owner Terry Murtaugh didn’t sweat too much when one of his vehicles disappeared from in front of a hotel in Boston. The software replayed the path the thieves took and pinpointed the vehicle’s exact location. Police were able to recover it and apprehend the thieves within 10 minutes.

“When I was transferred to the state police, I was notified that I needed to file a vehicle theft report as soon as possible with the local police in order to justify the arrest,” Murtaugh said. “We were able to track the vehicle down and the police were able to make the arrest quicker than the necessary paperwork could be filed.”

Lower Fuel Expenses Idling eats up a lot of fuel, and usually for no good reason.

Fleet management software can track how long an engine is running while a vehicle isn’t actually going anywhere. The savings — from lower fuel costs to reduced engine wear and tear — can be enormous.

“Now we get idling and speeding reports sent to us via email every Monday, and in less than four minutes we can scan our vehicles and get a handle on what they’ve done for the week,” said Steve Kimball of Kimball Construction. “If we have concerns we can go back and talk to the driver about it.”

One driver was idling for T H E

several hours at a time, burning as much as one gallon of fuel per hour.

Because of the idling reports, Kimball was able to bring it to the driver’s attention and change the habit.

Cover Your Drivers’ Backs It’s a simple fact of life.

Sometimes unethical people try to take advantage of companies to make an extra buck. But fleet tracking software can help cover your team if someone attempts to make an untrue claim against them.

“We have had people tell us the driver was here, etc., and the driver would have a different story,” Kimball said. “Now, by having the system, we can debunk the story of things that people say our drivers are doing.

We have already had a few instances since getting a fleet management system that we were able to prove our drivers were right and in the correct place.”

The software can also show whether a driver was speeding, saving money on tickets, and in some cases may be used as evidence in court if an incident comes to that, helping companies protect themselves and their drivers from liability.

Incrementally, each one of these tactics adds up to big savings and greater productivity for your fleet.

So if you’re looking for a tool to help optimize your team, consider fleet management software as a cost-effective solution with a huge payoff.

Todd Ewing is director of Product Marketing at Fleetmatics.

C O N T R A C T O R ’ S

C O M P A S S

A u g u s t

2 0 1 4

11

Feature Public Private Partnerships: Payment Security Concerns

by E. Colette Nelson and Lenora Marema

through taxes or that can be accessed with revenue bonds or borrowing. Typically, the public entity will authorize the private entity to design and build and, frequently, operate and maintain the resulting public work. P3 agreements attract the private capital for needed projects now, and the private party is paid back though some stream of public revenue that the public entity grants, such as the right to collect tolls, which in turn provides profits to the private partner’s investors.

For construction subcontractors and suppliers, one major concern with P3s is that established payment assurances under existing law may not apply. Mechanic’s lien laws generally do not apply to construction on public land, and federal, state or local governments most often own the land on which P3 projects are built. Statutory payment bonds are required in all states for contracts awarded by public owners based on a public design and with public funding. Under a P3, however, the private partner — frequently called a concessionaire — contracts with the public entity, and the private partner then retains the construction contractor to complete the construction phase of the P3. Under normal circumstances, the Established payment concessionaire is required assurances under existing law to follow all procurement laws, including may not apply to P3 projects. providing payment and performance bonds, 34 states have laws allowing the but legislation is being use of P3s, but some are silent enacted specifically for these projects. about payment assurances.

P3s are relatively new to the United Do not assume that state States and 34 or federal law will provide states currently payment assurances on P3s. have a variety of

Could your company be working on a public construction project without the payment assurances you thought it had under state or federal law? With the increased use of public-private partnerships (P3s), this question is a real concern for construction subcontractors and suppliers that rely on statutory payment assurances such as payment bonds and mechanic’s liens.

P3 projects, historically used for traditional transportation infrastructure projects like turnpikes, are increasingly being used for social infrastructure such as college dorms and hospitals. P3s are long-term contractual agreements between a public entity and a private partner in which the private partner, in exchange for compensation, invests its own assets and delivers a public service or facility. Governments are turning to P3s because infrastructure needs far exceed the funding available in the budgets raised

IN THIS ARTICLE . . . �

�

�

12

A U G U S T

2 0 1 4

T H E

laws authorizing the use of P3s for various types of public projects.

Some state laws are silent about payment assurances, assuming that all state procurement laws would be applicable to P3s. A few state laws specifically allow alternatives to payment bonds, such as parent company guarantees or equity partner guarantees, which could make it difficult, if not impossible, for subcontractors and suppliers to successfully pursue a claim. Other laws authorize the public entity to determine the amount and form of the payment assurance, meaning that the amount could be zero and the form could provide illusory protections. Still other states have enacted multiple laws, some of which provide payment assurances and some of which do not.

Subcontractors and suppliers bidding and working on P3 projects should carefully review and understand the contract’s payment assurances and not assume that state or federal law will provide them. Payment protections may not exist unless they are specified in the authorizing legislation relating to P3s or included as a provision in the solicitation and award documents relating to a specific P3 project.

A lack of payment protections shifts very substantial risks to subcontractors and suppliers.

Typically, subcontractors and suppliers extend large amounts of credit before submitting an invoice to the project’s prime contractor.

They may have paid workers and suppliers and estimated taxes before knowing if payment is forthcoming for completed work.

Such substantially increased risk cannot be accepted without ascribing a cost by the prudent business.

Such cost is ultimately borne by the

C O N T R A C T O R ’ S

C O M P A S S

taxpayer. If the risk is deemed too great, the most skilled and successful subcontractors and suppliers may have to forgo participation, particularly if the business climate provides less risky business opportunities.

Performance bonds also provide important benefits for subcontractors and suppliers on projects. Owners, subcontractors and suppliers all lose the benefit of the surety’s prequalification of the general contractor if a performance bond is not required. The surety’s underwriting of a bond is crucial to the success of construction projects.

The surety provides a bond only to contractors that, in the surety’s opinion, are capable of performing the work. The surety examines the contractor’s capacity to perform the work, character, ability to work in the region where the project is located, current work in progress and overall management as well as its capital and record of paying its obligations. By issuing a bond, the surety provides the owner, investors, taxpayers, subcontractors and suppliers with assurance from an independent third party, backed by the surety’s own funds, that the contractor is capable of performing the construction contract. While the surety’s underwriting of a bond aims to prevent default and nonpayment in the first place, if the contractor runs into trouble on the project or defaults, the surety provides the resources and funds to ensure contract completion and payment of subcontractors and suppliers.

Although federal and some state laws currently may be inadequate in providing payment security for subcontractors on P3s, their growing use may change that. Organizations representing construction subcontractors and suppliers, including the National Association of Credit Management (NACM) and the American Subcontractors Association (ASA), and the surety industry, including The Surety & Fidelity Association of America (SFAA), the American Insurance Association (AIA) and the National Association of Surety Bond Producers (NASBP) are collaborating to pursue federal and state legislation to extend the T H E

C O N T R A C T O R ’ S

public policy benefits of laws that require prime contractors on public construction contracts to provide payment and performance bonds.

The best way to provide payment assurances for construction subcontractors and suppliers on P3s is to require by statute that the P3 agreement will require the private partner to bond the construction phase of the P3 as would be required under the federal Miller Act and state Little Miller Acts.

That is why it is not only important to forcefully advocate for such a provision when Congress or a state legislature is initially shaping its legislation to create authority for P3s generally, but also to get involved on the local level in the process of developing requirements for a specific P3 project. It is also imperative to amend existing laws that lack payment protections for subcontractors and suppliers or afford inadequate payment protections.

In states where the current authorizing statutes for the conduct of a P3 project are silent regarding payment protections for subcontractors and suppliers, the collaborating national associations and local partners will seek a contractual provision to extend the payment protections of the state’s Little Miler Act by a provision that appears in the contract solicitation and the resulting contract.

The collaborating national associations and local partners already have had a significant impact on policymakers. For example, in 2013, California, Florida, Illinois, Maryland and North Carolina enacted laws that assured that subcontractors and suppliers have payment assurances on P3 projects. In 2014, additional state legislatures are considering bills that would extend payment protections to P3 projects.

Virginia and Indiana have been the most active states in allowing P3 projects and have done so with little or no bonding. These are high priority states in which existing P3 laws may be amended in the near future.

As with all projects, subcontractors and suppliers on P3 projects should assess the source and quality of C O M P A S S

payment assurances. Before signing a contract, the subcontractors and suppliers should request a copy of all bonds and verify their authenticity.

SFAA’s Bond Obligee Guide’s list of surety companies and contact information (http://www.surety. org/?page=VerifyYourBond) can help.

Subcontractors and suppliers can also determine if a surety is admitted in the jurisdiction of the project by checking with the state insurance department, which can be found on the National Association of Insurance Commissioners’ Web site (http:// www.naic.org/state_web_map.htm).

Finally, the Department of Treasury’s Circular 570 (http://fms.treas.gov/ c570/c570_a-z.html) contains a list of approved sureties for federal projects.

Government entities in the United States have understood the importance of surety bonds and have required bonds for over a century to provide performance and payment assurance for the nation’s infrastructure projects. Although new procurement methods have evolved — including the increased use of P3s in the US — construction risks remain the same, making surety bonds just as relevant and important today. Bonding is a tool that protects taxpayer and investor dollars and supports economic empowerment, sustainability, job creation and legacy wealth for contractors and subcontractors, and the surety industry remains ready to provide bonding for all types of construction delivery mechanisms, including P3 projects.

E. Colette Nelson is chief advocacy officer of the American Subcontractors Association, Inc. (ASA). She can be reached at cnelson@asa-hq.com. Lenore S. Marema is vice president of government affairs of The Surety & Fidelity Association of America (SFAA). She can be reached at lmarema@surety.org. Reprinted with permission. This article originally appeared in the June 2014 issue of Business Credit, a publication of the National Association of Credit Management.

A u g u s t

2 0 1 4

13

Save the Date!

March 26 - 29, 2015

Seattle, Washington

Renaissance Seattle Hotel

Want to Be Federal Contractor? ASA’s Ethics Awards Application Process Can Help

by The American Subcontractors Association

completion date to each step in gathering or producing the needed documentation to complete an application, including: finalizing policies, scheduling ethics training, soliciting recommendation letters, arranging for payment of the application fee, and reviewing and submitting the application.

Firms that are developing, or have implemented, a corporate ethics code or training program, may have most of the materials needed to apply for ASA’s ethics award. Some examples of materials that should be included with an application are: an internal financial controls policy, a non-discrimination and/or anti-harassment policy, a process for timely and fair resolution of customer complaints, and a recommendation letter from a competitor, a customer, and a supplier.

Federal government regulations require contractors and subcontractors working under federal contracts over $5 million and lasting more than 120 days to implement a Contractor Code of Business Ethics and Conduct.

ASA’s Excellence in Ethics Awards application process can help subcontractors establish such an ethics code or training program.

ASA has developed a resource guide and a Model Timeline to help subcontractors prepare and submit an application for the 2014 ethics awards by the Dec. 12, 2014, deadline. The guide contains model documents, such as sample recommendation letter requests and model policies on topics ranging from competition and conflicts of interest to internal procedures and whistle blowing. The timeline assigns a

Subcontractors that are honored with the ethics award can use the distinction to demonstrate to the federal government that their company has “made integrity part of their business practices,” notes Malcolm Sweet, Air Masters Corp., Fenton, Mo., a recipient of the 2012 and 2013 ethics award. “If you engage in federal contracting, you are required to have a functioning ethics program. The ASA ethics award allows you to prove to government contracting officers with agencies such as the General Services Administration, Department of Defense, Department of Energy, etc. that your program is in place and functioning.”

More information is available under “Education & Events” on the ASA Web site.

2014 Excellence in Ethics Award Application Deadline: Dec. 12, 2014

FIX

Is your company committed to professionalism and sound business practices?

Let your clients, employees, and others in your community know by applying for QQ ASA’s 2014 Excellence in Ethics Award!

Resources • Model Timeline for Preparing an Application • Brochure • Application • Resource Guide • Q&A LinkedIn Group • Video

T H E

This prestigious award provides national recognition to subcontractors that demonstrate the highest standards of integrity in the construction industry. Award winners are selected based on corporate ethics policies and procedures, construction industry practices, and general business practices.

Awards applications will be evaluated by Nitish Singh, Ph.D., an associate professor in International Business and the program leader of the Certificate in Corporate Ethics & Compliance Management at Saint Louis University, St. Louis, Mo.

C O N T R A C T O R ’ S

For more information, visit “Education & Events” on the ASA Web site.

C O M P A S S

A u g u s t

2 0 1 4

15

Feature OSHA Hazcom and the Global Harmonized System

by Wayne Baruch

Hazard Communication, Section 1910.1200 (www.osha.gov/dsg/ hazcom/index.html).

These principles do, or should, not merely derive from a regulator’s mindset. From a slightly different perspective, prudent, enlightened manufacturers, distributors, shippers, and employers want workers to handle hazardous products safely for their workers’ benefit; to minimize costs and liability due to illnesses, injuries, and deaths; as well as reducing the risk of environmental hazards due to toxic spills, fires, explosions, etc. One key to limiting those liabilities is the effective communication of proper storage and handling of these materials, and ensuring that all persons take proper precautions in doing so. That is the role of Hazcom.

Several tools and techniques communicate information about hazards: 1. Equipment, tools, spaces, materials, and other hazardous or potentially hazardous items are labeled, signed, barricaded, and otherwise identified to mitigate those hazards according to relevant local, state, and federal authorities and regulations.

2.

Prior to each work shift or when a hazard is discovered, equipment, tools, spaces, materials, are inspected by the competent person or qualified person GHS uses pictograms to to address the hazard present the potential hazard and communicate the that the chemical presents. hazardous condition to workers and other people.

Components of a Worthy 3.

A Material Safety Data Sheet Hazcom Program.

“MSDS” is the document that If your firm doesn’t have the manufacturer, prudent risk management in governmental agency, force, hire a safety officer. and other parties produce to describe

A number of federal and state agencies within the U.S. Department of Labor have an interest in training and safety for the American workforce, the most prominent of which is The Occupational Safety and Health Administration. The OSH Act of 1971 enables OSHA’s authority, “To assure safe and healthful working conditions for working men and women; by authorizing enforcement of the standards developed under the Act; by assisting and encouraging the States in their efforts to assure safe and healthful working conditions; by providing for research, information, education, and training in the field of occupational safety and health; and for other purposes.”

That oversight crosses industries and types of work. For example, office workers’ use of cleaning chemicals, welders’ use of gasses, and painters’ use of thinners are all addressed by the OSH Act. Communication and labeling of those hazards by employers are covered by

IN THIS ARTICLE . . . �

�

�

16

A U G U S T

2 0 1 4

T H E

products’ properties and required personal protective equipment that should be used for handling and using it.

4. Regular training is provided when a new hazard is introduced or discovered, when a new employee joins the organization, when new personal protective equipment (PPE) is introduced, when the employer believes that employees’ dedication and expertise to handle the hazard properly has declined, or as a reminder.

5. Lock-outs and tag-outs identify equipment, materials, and other hazards that are in an unsafe, nonoperational, or otherwise abnormal state.

6. Right-to-Know — OSHA and some state agencies require employers to notify all stakeholders of chemicals and associated hazards that they pose.

MSDS’ are a good tool for communicating with workers, except that their content and format are not consistent, which does not support safety or protect manufacturers, distributors, shippers, or employers optimally well either. OSHA has seen another particular shortcoming: we live in a worldwide economy in which products cross boundaries, yielding a virtual international Tower of Babel. For that reason, The Hazard Communication Standard is now aligned with the United Nations Globally Harmonized System of Classification and Labeling of Chemicals (GHS). The GHS, which went into effect in December 2013, seeks to eliminate these failings.

Among the many other good resources on its Web site, OSHA has drafted a comparison of the differences between Hazcom and GHS at https:// www.osha.gov/dsg/hazcom/docs/ ghsoshacomparison.pdf.

C O N T R A C T O R ’ S

C O M P A S S

TOXICITY Agent Sodium chloride (table salt) 2,4-D (a weed killer) – Toxic Caffeine (in coffee) – Toxic Nicotine (in tobacco) – Highly Toxic Sodium Cyanide – Highly Toxic Strychnine sulfate – Highly Toxic Botulinus toxin – Highly Toxic

Rat LD50 (mg/kg) 4,000 368 127 24 6 3 0.01

One measure of toxicity, rat LD50 A chemical labeled poison is “very toxic” LD is the chemical’s lethal dose LD50 is the LD that kills 50% of the population LD50 <= 50 mg/kg is “highly toxic” LD50 of 50 to 500 mg/kg is “toxic”

PEL (permissible exposure limits) – time-weighted average exposure concentrations over 8-hours that should not be exceeded REL is the NIOSH Recommended Exposure Limit C (ceilings) – exposure concentrations at any moment of time that should not be exceeded Action Levels – exposure concentrations that trigger certain regulatory requirements ACGIH (American Conference of Governmental Industrial Hygienists) establish TLV (threshold limit values) – time-weighted average exposure concentrations over 8-hours that should not be exceeded and STEL (short term exposure limits) – exposure concentrations for 15 minutes that should not be exceeded PELs, Common Solid Hazards mg/m3 TWA PELs, Common Liquids or Gases ppm TWA Lead 0.05 Vinyl Chloride 1 Silica Dust (100%) 0.1 Hydrogen Cyanide 10 Silica Dust (8%) 1.0 Hydrogen Sulfide 20 Wood, Gypsum, “Nuisance” Dust 5 Methylene Chloride 25 Carbon Monoxide 50 Mineral Spirits 500 The GHS now uses pictograms to graphically present the potentialEthyl hazard that the chemical Alcohol 1000 The NIOSH Pocket Guide to Chemical Hazards is a terrific resource, and can be found at presents. http://www.cdc.gov/niosh/npg/pgintrod.html

Components of a Worthy Hazcom Program

Components of a Worthy Hazcom Program

1) Determine what hazardous chemicals are present and the conditions under which they are hazardous.

1) Determine what hazardous chemicals are present and the conditions under which they are 2) Written safety program.

3) Use of signage, guards, lock-outs, hazardous. tag-outs, etc.

4) Excellent Documentation and 2) Written safety program.

Record-Keeping. a) Safety Data Sheets for all 3) Use of signage, guards, lock-outs, tag-outs, etc. chemicals that are used, a copy of which must be kept in a binder at the primary workspace, in workers’ trucks, in the storage location, with bills of lading, and anyplace The GHS now uses pictograms to graphically present the potential hazard else where people would that the chemical presents. reasonably need to refer to the 1. Exploding Bomb — explosives, self-reactives, and organic peroxides.

1. Exploding Bomb — explosives, self6. Skull and crossbones — acute toxicity SDS; reactives, and organic peroxides. (severe). b) Yes, Safety Data Sheets may 2. Flame — flammables,self-reactives, self-reactives, pyrophorics, self-heating, flammable gasses, 2. Flame — flammables, 7. Exclamation markemits — irritant, dermal be stored and made available pyrophorics, self-heating, emits sensitizer, acute toxicity (harmful), electronically, as long as they flammable gasses, and organic narcotic effects, respiratory tract and organic peroxides. peroxides. irritant. remain available for use in case 3. Flame over circle —— oxidizers.

8. Torso — carcinogen, respiratory of emergency.

3. Flame over circle oxidizers. sensitizer, reproductive toxicity, 4. Gas cylinder — gasses under c) Proper, intact labeling of mutagenicity, aspirational toxin. pressure.

4.

Gas cylinder — gasses under pressure. chemicals or other potentially 5. Corrosion — corrosives.

5.T Corrosion corrosives.

H E C — O N T R A C T O R ’ S

See §1910.1200, Appendix C.

C O M P A S S

6. Skull and crossbones — acute toxicity (severe).

A u g u s t

2 0 1 4

17

hazardous material purchased, sold, shipped, and transferred from one container to another; d) Training in proper handling and use (who, what, where, when, by whom); e) Accident occurred (refer to the SDS and other documents on first aid, cleanup, etc.).

2) Regular Monitoring and Training. a) Safety training and proper use of personal protective equipment; b) Nature of chemicals being handled; precautions; various forms of reactivity; risks of spills, exposure, fire, etc.; c) Are workers storing, transferring, and using chemicals properly, according to accepted standards; if not provide retraining and if deemed prudent, disciplinary action; d) Employees must know about fire, explosion, and other hazard precautions, equipment, and structures, how to properly make use of it, and how to avoid defeating safety measures.

3) Other Prudent Consultations and Considerations. a) Chemtrec (chemtrec.com); b) Centers for Disease Control (cdc.gov); c) Research state and federal agency(ies) that may have jurisdiction of chemicals that your organization uses (e.g. transportation, environmental health and safety, labor, agriculture, food and drug, consumer product safety, aviation, maritime, emergency management, interstate/ international commerce); d) What building codes, ordinances, regulations, techniques, reporting, and other measures are required for normal and/or emergency operations? e) Key People — General Manager (GM), Corp. Counsel (CC), Head of Human Resources (HR), Safety Officer (EHS), Liability Insurance Carrier (INS); i) Contracts (CC, GM)

18

A U G U S T

2 0 1 4

ii) Multi-employer worksites (CC, GM, EHS, INS) iii) Personnel policies (CC, GM, HR, EHS) iv) Develop, conduct, and manage Risk Management & Safety Program (EHS, GM, INS, CC) v) Liaison with building partners and other stakeholders (EHS, GM) vi) Emergency drills (EHS, GM) vii)Coverage for hazards (company; its vehicles, private vehicles, worksites) (GM, CC, INS) f) Local Police, Fire Marshall, and Emergency Management Service; i) Officials must be aware of hazards that are/may be present at your location(s) ii) Emergency procedures and notification list in place

Where to Go from Here If your firm does not have prudent risk management and safety planning in force, today, you must hire a safety officer to address that failure. Otherwise, your firm, staff, clients, and building partners are at immediate risk of a chemical accident. Your firm may be cited by regulatory agencies for relevant willful violations. Besides that, your firm and its building partners must comply with OSHA Hazcom and all other agencies’ standards to mitigate the environmental, health, and economic risks.

If an employee or other person believes that he or she has observed related mistakes or other unsafe conditions due to an employer or another employer, he or she should immediately call OSHA, EPA, or other relevant authority.

According to The Occupational Safety and Health Act, “No person shall discharge or in any manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to this Act or has testified or is about to testify in any such proceeding or because of the exercise by such employee on behalf of himself or T H E

others of any right afforded by this Act.” §1903.11(d). Consult with your attorney to better understand Federal and State Whistleblower laws.

More information on OSHA compliance is available from your local OSHA office. Training is available at http://outreachtrainers. org/client/trainer_results.aspx. A number of commercial firms make safety professionals available to develop and/or polish your safety program. Consult with counsel and your insurance professional for their guidance. Collaborate with suppliers, customers, and building partners to make sure that your practices are all in compliance, or ideally, even more stringent than required. Everyone should go home healthy and uninjured at the end of the workday.

Wayne Baruch is head of The Artisans Group, a Hillsborough, NJ-based construction expert witness practice dealing with issues of business and technical practices, compliance with codes and regulations, and occupational health and safety issues. He can be reached at 908-533-3204 or wbaruch@artisansgroup.biz.

DISCLAIMER: The Artisans Group’s expert witness practice supports attorneys, prosecutors, owners, and construction and trade professionals in their efforts to fairly, accurately document the facts of the case at hand in comparison with building code, ordinances, architectural and engineering plans, standards of practice, any contracts that may be in effect, etc. Any references to expertise in construction-related matters are a function of our skill, knowledge, and experience as a construction and business professional. They are not intended, nor should they be construed, as legal advice in any respect by The Artisans Group. We encourage those seeking legal advice to consult with an attorney of their choice to discuss all legal matters. Furthermore, work that must be performed by other licensed, regulated professionals is referred to those properly credentialed parties.

C O N T R A C T O R ’ S

C O M P A S S

Legally Speaking Legally Speaking: Project Legal Considerations for Field Personnel

by Adam Harrison In my legal practice, there is always a moment of trepidation when a client calls with a major legal issue on a project. Typically the call will start with client management identifying the problem, followed by a recitation of facts and circumstances explaining the reasons the client was impacted, and the call typically ends with “what should we do because this issue had a major impact on our company?” With larger organizations, home office management often becomes keenly aware of the problem once the impact is fully known.

And hence begins my initial string of questions to ascertain whether the client prejudiced its rights by acting or failing to act to protect its interests. This article aims to educate contractors on the best business practices to protect itself at the field level on a troubled project — practices that start from the Notice to Proceed and continue until final payment.

The Contract I am often amazed at the range of responses I receive when I ask for the contract documents as my first request.

Did the client have a written contract?

Did the client simply sign an onerous prime contract without any effort to negotiate its terms before execution?

Did the client commence work and thereafter trade contract amendments back and forth without any final document? What about the exhibits and other contract documents incorporated by reference? Does the client even have these documents?

The importance of the contract cannot be overstated. After all, how else can it be determined if a breach occurred without knowing the basis for a breach?

The analysis starts with the notice provisions for claims, the methodology to request and handle change orders, and the other requirements that address the issues in dispute. But the

T H E

C O N T R A C T O R ’ S

process goes further and can include claims and issues that may have been waived or released absent affirmative action by the client. Reading the fine print for the first time when the project impact becomes apparent is often too late. The best business practices here require aggressive negotiation before contract execution that includes both the project manager and project executive to assure all key players understand the contractual terms prior to project commencement.

The Schedule More often than not, many legal issues involve an analysis of the project schedule or, better stated, the lack of a project schedule. Most of our clients are “following contractors” that depend upon the timely completion and sequencing of predecessor work. If a given project exhibits schedule slippage or coordination issues, written notice explaining the impact on the contractor along with specific requests for updated project schedules provide compelling evidence of a contractor’s due diligence and commitment to the project. This especially holds true if predecessor activities impact critical activities on a project with liquidated damages.

Document the project file and inform management of potential issues as the issues develop.

Notice of Claims Notice of project claims is among the most important considerations affecting the legal process. The concept of notice is not always a technicality.

Instead, proper notice can serve to help other parties in the contracting process initiate actions to mitigate damages in C O M P A S S

�

�

�

real time. Notice issues almost always arise at the field level, and typical questions regarding notice involve the adequacy of comments asserted in emails and project meeting minutes.

Certainly these writings are better than silence, however, the best business practices for notice involve a proper written “notice of claim” coupled with the submission of a Pending Change Order as a “coat hook” for costs and expense on the specific issue.

When it comes to notice, the typical concerns of the client involve the desire to maintain an amicable working relationship with the customer.

However, submitting claims for the first time at project completion will certainly not foster a good future relationship, and this especially holds true where upstream contractors can pass timely claims through to the responsible parties. Regardless, contract language often has stringent notice requirements, and certain courts have made a distinction between “reserving the right to file a claim” and actually “filing the

IN THIS ARTICLE . . .

Negotiate terms before contract execution.

Many legal issues involve the lack of a project schedule.

Notice of project claims almost always arise at the field level.

A u g u s t

2 0 1 4

19

claim,” with the former interpreted as the reservation of a right and not an actual claim within the meaning of the contract. Written notice of claims when the issue is first known, coupled with a contemporaneous change order request, is the best practice. If costs are uncertain, use language such as “to be determined” and file a supplemental revised change order when costs are ascertained.

Change Orders Home office management is well advised to coordinate with field personnel prior to executing any change order containing waiver of rights language broadening a release beyond the subject matter of the specific change order. A common example is the waiver of claims for “all time impacts and delays up to and including the date the change order is executed.”

It is incumbent upon field personnel to keep the home office informed of project status because the inadvertent execution of change orders can affect unrelated claims.

Lien Releases This topic is perhaps the most

W

important consideration affecting the legal analysis of a troubled project and underscores the reasoning for submitting change order requests.

When field personnel fail to properly communicate with the home office, there is a grave risk that monthly lien releases waiving claims will unknowingly be executed in exchange for progress payments.This especially holds true for larger organizations that have separate accounting departments that handle receivables. It is imperative that all personnel involved in the payment chain coordinate in advance with respect to the handling of lien releases on every project.

Several factors come into play with lien releases. If a project has a known issue in dispute, specific exclusions to the release should be inserted to assure rights are protected. At the very least, if the contractor is submitting written notice and change order requests as indicated above, higher-tier contractors and owners would be hard pressed to argue that a partial lien release includes a waiver of future rights on every unresolved change order.The key factor here is communication, insofar as a breakdown in communication on this critical document that occurs months or years earlier can have far reaching effects

New On-Demand Videos from FASA hen it comes to managing your business, the Foundation of ASA is your partner in education. View and

listen to FASA’s on-demand videos at an individual workstation or in a conference room for group training. Your order includes access to the on-demand video any time, and as many times as you’d like!

These are just two of the on-demand videos available through the FASA Contractors’ Knowledge Depot to meet your business management training needs.

when the issues are ripe for dispute resolution.

The successful contractor in today’s business climate requires a well-educated field team to understand and confront project issues in real time. However, it is not enough to document and protect issues only with the customer. Field personnel must communicate, educate and protect the home office to assure a unified and seamless approach to handle and protect project issues.

Adam C. Harrison is the founder and president of Harrison Law Group.

Harrison Law Group provides counseling and legal representation to construction industry professionals at all levels of the building process, including owners, architects, engineers, sureties, general contractors, construction managers, subcontractors and material suppliers.

Read more at www.harrisonlawgroup. com. Adam Harrison can be reached at aharrison@harrisonlawgroup.com.This article is for informational purposes only and is not necessarily representative of the current state of the law. It is not intended as legal advice and the reader is encouraged to consult an attorney before taking any action.

Contractors’ Knowledge Network “Prequalification Management” (Item #8067) Construction subcontractors are learning how to make the prequalification process as efficient as possible to allow their companies to submit qualifications to “maximize the gain and minimize the pain.” The video-ondemand, “Prequalification Management” (Item #8067), explains how and why general contractors and project owners use subcontractor qualification programs and explores opportunities for subcontractors to differentiate their quotes or proposals from their competitors. The video also examines how subcontractors can position their firms if they have strong experience and financials — and how to mitigate the possible negative consequences if they have weak financials or relevant project experience.

Price: $65 Members/$95 Nonmembers

“Preparing for a Changing Work Force” (Item #8068)

Construction subcontractors are learning how to Many construction businesses are looking for strong leaders who can deliver accelerating results as their companies recover from the recession and maintain that momentum through a generational transition in the future. Many young people entering the work force, however, are discouraged with finding jobs in those sectors hit hardest by the recession, including the construction industry. Faced with this dilemma, how can businesses compensate for this demographic convergence and develop their future leaders and managers? The video-on-demand, “Preparing for a Changing Work Force” (Item #8068), explains how companies can identify and grow the potential of non-traditional resources and how to build an infrastructure and corporate culture that nurtures innovation and creative thinking..

Price: $65 Members/$95 Nonmembers

Order online at www.contractorsknowledgedept.com or call 1-888-374-3133 20

A U G U S T

2 0 1 4

T H E

C O N T R A C T O R ’ S

C O M P A S S

Contract Corner Negotiate Better Contract Terms

ASA’s “Subcontractor’s Negotiating Tip Sheets” are designed to help subcontractors navigate harmful contract language and provide information they need to negotiate a particular subcontract clause, including ASArecommended language, samples of what a subcontractor may see in a client’s proprietary subcontract, and an explanation of the impact of poor language on a subcontractor.

Recently released tip sheets focus on: “Price Escalation,” “Limitation on Damages,” and “Payment Rate for Extra Work.”

Price Escalation General contractors sometimes include a provision in their proprietary subcontracts to protect them against price increases: “The Contractor agrees to pay the Subcontractor for the performance of its work hereunder the following sum or sums, which shall unless otherwise specified, include all taxes, insurance premiums, charges for permits and all other fees and charges, and shall be firm and binding on the Subcontractor for the work and not conditioned upon a firm completion date or on any labor increases or material escalation costs which might occur during the course of construction.” The subcontractor may have to absorb all the costs of inflation of labor and materials, even when the owner and/or T H E

C O N T R A C T O R ’ S

contractor cause extended delays in the project. Furthermore, failure to address price escalation during the subcontract negotiation process may lead to unnecessary disputes during the project. ASA recommends: “A change in the price of an item of material of more than 5 percent between the date of the subcontractor’s bid proposal and the date of installation shall warrant an equitable adjustment in the subcontract price.”

for delay damages shall not exceed 5 percent of the original subcontract value. Customer expressly waives all claims for special, incidental, or consequential damages it may have against Subcontractor, including without limitation damages for principal office expenses, loss of financing, loss of business and reputation, and loss of use.”

Limitation on Damages

General contractors sometimes include a provision stipulating the percentage fees for extra work: “Percentage fees for overhead and profit for extra work shall be __% for work performed by Subcontractor’s own forces and __% for work performed by its subcontractors and suppliers.” The subcontractor may find that its customer does not recognize as reimbursable costs, important direct expenses such as fringe benefits and supervision, as well as general overhead and profit. The subcontractor may also find that the payment rate for extra work does not cover its actual costs, let alone provide for a profit. ASA recommends: “Subcontractor shall be entitled to payment for extra work at the following rates and/or mark-ups: ________.” It is important to note that in negotiating rates for extra work, a subcontractor should consider, among other things, direct labor, supervision, fringe benefits, payroll taxes, insurance, use of tools, general overhead, and profit.

A common provision in general contractors’ proprietary subcontracts includes liability for liquidated damages: “Subcontractor shall be liable to the Contractor for any delay or damages, including consequential or liquidated damages, threatened or assessed against the Contractor.” The subcontractor could find that the daily penalty amount is out of proportion with its work on a project, or the subcontractor could find itself responsible for liquidated damages even when the owner has not required such damages. A liquidated damages requirement may be included in the owner-contractor agreement.

A prudent subcontractor will insist upon seeing all of the documents included by reference in its subcontract. Furthermore, the general contractor could collect from each subcontractor the daily amount of the liquidated damages that it owes to the owner. ASA recommends: “Customer shall make no demand for liquidated damages or actual damages for delays in excess of the amount paid by the Customer for unexcused delays actually caused by Subcontractor.

Subcontractor’s maximum liability C O M P A S S

Payment Rate for Extra Work

ASA tip sheets are available in the members-only section of the ASA Web site.

A u g u s t

2 0 1 4

21

ASA/FASA Calendar September 2014

December 2014

9 - Webinar: How to Bid More Competitively on Government Construction

19 - Deadline for Chapters to Submit Applications to ASA Headquarters for 2014 National Construction Best Practices Award

Los Angeles, Calif.

January 2015 13 - Webinar: Negotiating Retainage

October 2014 14 - Webinar: The Value of Technology and Data Management for Construction 22-25 - ASA Executive Committee, Board of Directors, Legal & Advocacy Meetings

February 2015

• Innovation—The World

March 26-29, 2015

• Using Technology as a

November 2014

Seattle, Wash.

18 - Webinar: Common Practices and Effectiveness of Incentive Compensation

April 2015

December 2014 9 - Webinar: Where Are We Now? 2014 Election Results and Outlook for 2015 Legislative Sessions

Theme: Technology

10 - Webinar: Mechanic’s Liens: Protect and Collect

of Construction 2.0

System of Engagement

SUBExcel 2015

21 - Deadline for Application Submissions to Chapters for 2014 National Construction Best Practices Award

in the September 2014 Issue of ASA’s

THE

9-10 - ASA Executive Committee and ASAC Board of Directors Meeting

Coming Up . . .

• Prequalification

Technology

• Predicting and

14 - Webinar: Non-Negotiators’ Strategies for Negotiating Outstanding Results

Preventing Injuries on Construction Sites Using Advanced Technology

• .BUILD: The Future of

the Internet

May 2015 12 - Webinar: Managing the Life Blood of Contracting - Cash Flow June 2015

• Legally Speaking: Using

Technology to Monitor Receivables

Look for your issue in September.

9 - Webinar: Bidding from the Other Side: How GCs Use GradeBeam to Find Subcontractors

Past Issues: Access online at www.contractors knowledgedepot.com

Contact information for all ASA and FASA events/programs: www.asaonline.com education@asa-hq.com

22

A U G U S T

2 0 1 4

T H E

C O N T R A C T O R ’ S

C O M P A S S

What other sureties wouldn’t dream of, we do every day. We’re accessible, responsive, flexible, and always ready to talk. Above all, we handle the bonding cases other sureties can’t. (Or won’t.) So if your case seems a little out of the ordinary, call us instead: (860) 415 8400.

SURETY FOR AN IMPERFECT WORLD

Surety Bonding • Treasury Listed • Rated A VI by A.M. Best • Licensed Nationwide • 30 South Road, Farmington, CT 06032 • (860) 415 8400 Henry Nozko Jr., nozkojr@acstarins.com • Henry Nozko III, nozko3@acstarins.com • acstarinns.com